Japan’s Finance Minister Taro Aso spoke after the cabinet meeting on Tuesday. He confirmed an upgrade in the G7 corporate tax deal. The policymaker announced member states’ consensus on 15% minimum tax on corporations after a series of deliberation. The group’s representatives met in London over the weekend to clinch consensus on the long-standing discussion.
Over the past years, countries have experienced a significant decline in tax revenues. They heavily rely on tax cuts from smaller corporations.
There has been a clear downward trajectory in fiscal revenue in the United States alone despite the massive COVID-19 spending since last year.
President Joe Biden released a trillion-dollar stimulus injection in March to fund the US vaccination program for the record. The amount also helped keep millions of Americans off from the poverty line through unemployment benefits and other safety nets.
Currently, the US policymakers are in the middle of deliberation on the infrastructure deal, where bipartisan approval is elusive.
Moreover, inflation and debt to ratio concerns have become the main sources of disagreement. With this, the most powerful economy in the world is in serious need of some fiscal policy support to continue the swift running of the economy.
Along with the tax deal’s approval on the world’s elite economies, Aso highlights that this could quickly escalate to affect G20 member states.
Mexico is quick to voice the support. It is saying that the move will avoid stiffer competition against countries with lower tax rates.
For the record, low fiscal requirements became one of the main standards considered by international corporations over the past years.
Countries with such a scheme have a healthy foreign direct investment structure, which helps the labor market.
Republicans Say “Not Too Soon”
While other countries instantly voiced out their support, Republicans stand on the front line of the opposition.
The policymakers said that the move is “anti-US” and will create a disproportionate competitive culture in the overall economic operations.
In a brief context, the deal should largely hit the world’s biggest corporations, particularly that of the technology industry. This includes the world’s tech coalition FAANG, which stands for Facebook, Amazon.com, Apple Inc, Netflix, and Google. These five entities alone bring home a large chunk of bacon into the US economy, and a tweak in fiscal regulation will surely affect their running.
Analysts noted that the opposition from the other party might motivate President Biden to pass the initiative with only the Democrats’ votes.